Mortgage question

Hello Everyone,

I am new here, and have found this site really helpful.
I have a question on getting a home loan.
I have already had the 1st home owners grant (we ended up splitting up, so house was sold, no profit) and I would like to buy myself a unit or flat up to $150k. I saw my bank to find out my situation, they told me that I had to have 10% deposit. I am living at home and am slowly going mad and I would prefer to buy rather than rent. I am in stable employment and earn $45k a year plus I have $10k in debt (car) which I wanted to combine into the home loan. I would like to be out of home by Christmas. The thing I don't understand is the bank told me 'come back when you have 10% and your debt paid off', yet my friends who have 2 children, have $15k in car debt, they earn $45k between them, they have just had a new house built which cost them $240k and only had a $4000 deposit (no 1st home owners grant) and they were given a mortgage no problems. Why is this? Should I shop around?
Help would be appreciated.

The important word here is "Bank"

Go to a broker and you will find them a lot more helpful !!(They get paid if they get you a loan )

A deposit would be nice (even 5% $7500) and dont combine your car in (you wont be able to with 5% deposit anyway) as $10,000 over 4 or 5 years is better than interest over 25 -30..

Matt

Nicole is your nickname so I assume you are female.
I think you are being unfarily treated as a single female - so shop around.

I'd talk to a good financial planner and work out the best way forward for you first.

If you need to buy then as matt says try a broker and ask them what options/guidelines they have for someone in your situtation.

The lenders - whoever you use, like to see some form of deposit, to show you can save, as well as an ability to repay the borrowings + your car payments.

The lenders have recently been critisied yet again for treating single females differently to males ie re lending capacity, but some lenders are waking up to the fact that it does not mean it is a greater risk.

This site might help you get an idea on what might be possible for you, and my suggestion is do not go with the first lender who says yes, because they might be charging you more than you need to pay.

http://www.yourmortgage.com.au/

Some lenders now lend 100% but these are generally on new homes so I think you will need to have something like 5% of your purchase price and stamp duty costs saved up, plus perhaps your legals. Depends on the lender.
Can you get a private loan from family to help you get into a place then get a flatmate to help ease the costs and repay them.

Just a thought - Renting has known costs, no repairs etc and maybe you can put some money into some solid shares to get ahead while you rent.

But first up - talk to an expert and then think outside the box once you know the best options for you.

Good luck

Steve

Yep, 5% of the purchase price plus stamp duty is the minimum you'll reasonably be able to get.

At 5% you'll also need mortgage insurance but that should be able to be rolled into the mortgage.

I very much doubt anyone would put your car loan into the home loan - and this would be very unwise anyway. It means you'd be paying that car off over 25 years ! You'd end up paying two or three times as much. I don't think any lender would do it, and really you shouldn't even think about asking...

So patience grasshopper. Pay off the car first - or sell it. And keep saving. The time before you buy is your window of opportunity to save.

Pretend you are paying your mortgage off right now - figure out roughly how much the repayment would be and put that amount away as savings every week starting immediately.

A chap here at work recently got a loan for the FULL amount including all costs, insurances etc. This was for buying an existing "old" house.

They did very thorough checks on him and took a while. The exit fees are huge and so he is effectivly tied in for the next 5 years. He also pays a bit above the typical intrest rate.

He was prepared to make this sacrifice in order to get on the property ladder sooner. There is some good logic in this when property prices are rising but it certainly is not for everyone.

3xb

I would agrue that property prices are dropping in the eastern states (at least in real terms).

Really good if you can manage a 20% deposit as mortgage insurance is not cheap.

Wow thanks for all the replies....how stupid... of course I wouldn't want to combine my car loan with the mortgage...would end up being a very expensive car!
My bank I went to told me that they wouldn't/couldn't give me a mortgage untill I had the 10% deposit and my car paid off. Of course it would be nice if I could have my car paid off but hopefully by the end of the year when I am ready to buy I will have a fair chunk of it paid off. I too thought that I had been fairly untreated as I am sure there are a fair few people who have pre existing debt before they buy a house. The way I was treated, I know that they will not be getting my business when it comes time for a mortgage!

Nicole,

You may think your bank is being stingy, I think they are being prudent and looking after your interest. If they were selfish they would lend you the lot and get some profit out of you, and now.

If you ever hope to be financially secure a good start is to fully pay off your car loan and get a 10% deposit together. 20% would be perfect, but may take too long.

House prices are not racing up as they were a couple of years ago (or more recently in Perth). I think, and no one can predict the future, that house prices will stay fairly flat for at least another year (or two).

If you borrow 100% and the value of your property drops then you may need to sell into a falling market. Not a risk you want to take even if there's only a 5% change of a significant fall in property prices (an interest hike or two could do it!).

Cheers,
Casa

I disagree Casa. Look at how much she earns , how much she plans to borrow. Now consider that she is in stable employment and paying rent anyway considering she wants to borrow 3.3 times annual salary, it seems quite a realistic proposal. She sounds pretty level headed and conservative (financally) to me.

Repayments would be around $230 to $250 per week (at 7.5%) which is not far off from rent. A deposit is more about proving you self dicipline when it comes to putting money aside. If Nicole can show that she has the fiscal discipline, (an examination of repayment of car loan might be useful for this) the job security, then why not?

Now if Nicole was saying that she is a contractor, wants to borrow $280 000 and has a bunch of maxed out credit cards, then maybe not.

3xb

Salary = $45k
Living at home
Wants to move out by Christmas (therefore almost 7 months to complete saving)
Has $10k car loan
Wants to purchase $150k property
Bank wants Nicole to pay off car loan and save $15k before applying for loan.

Nicole,
You can save a lot more while living at home than you can while paying off a mortgage or renting.

The car loan is bad news since it would have a higher interest rate than a home loan.

If you want to be finacnially secure in the long run, my suggestion is stay living at home for another year (small price to pay when considering a lifetime) so that you can firstly pay off the car loan, secondly save $15k and then go and get yourself the lowest interest rate home loan you can get.

Once you've payed off the car loan, assuming you don't have an expensive lifestyle, things should come together beautifully.

Cheers,
Casa

Casa, I didn't want for this to turn nasty!
I now have $4000 in savings and $10000 owing on my car. I went to see where I stood and what things would look like by the end of the year. I will have more deposit by the end of the year. I can't stay at home passed December as my parents are moving and I would prefer to not rent and would rather buy. I can't see why I couldn't get a mortgage by then. If my friends can and they have 2 kids, I am sure I will be able to.

Hey Nicole here is a thought.

Have you thought about doing a bit of house sitting, it's rent free and it can get you in and out of mum and dads house till x-mas so you have a bit of space and sanity.

Some people go away for 6 months at a time and if you picked one up for early next year as well, then it could be a damn good way to save some rent time and also help you see what certain suburbn are like to live in without major commitiments of rent of purchase. I did it for 2 years and it worked a treat for me.

Re the others comments, I don't think it's anywhere near nasty, just explaining their thoughts.
Cheers
Steve

Nicole,

Don't worry about things getting nasty. We're a vocal group here and we welcome and respect all opinions.

Another thought for you. I know it's good to have some money up your sleeve for a rainy day, but $4000 in the bank is excessive when you ahve a $10000 personal loan. If you put $3000 of that into the car loan, after one year you would be $480 better off (assuming 16% loan rate). That $480 extra dollars towards your house deposit, for no extra effort.

Also, please tell me you pay your credit card off fully each month. If not, there are big saving to be made in this area.

If your earning $45k per annum, then your take home is $36.9k per annum. Now, given that you're living at home, if you can use half of this to first pay off the loand and then save towards a house deposit you should do pretty well. Use one of those 6 to 7% interest accounts once you're debt free. You shoudl have 5k toward your house by Christmas. Not quite there, but a good start.

To get to $15k would take another 6 months. If you can take up Yak_Chat's suggestion of house sitting for 6 months you should be there.

So close, yet ....

Cheers,
Casa

P.S. One more thing, if you can get your parents to lend you $15k, you'll have a 20% deposit and can therefore avoid mortgage insurance, which is a big chunk of money for nothing - it only protects the bank, not you.

are you eligable for the first home buyers grant? $10k there for you, depening on which state you're in...

My 2 cents worth.

I would strongly recommend you contact an independant broker, get them to come over and go thoru your situation. Talk to them about your plans, income etc and they will be able to advise you accordingly.

Then sit down and talk to someone you trust and has a bit of financial nouse. These guys should give you an honest answer as to whether or not you can afford it.

Also look at creating a budget, this will definately help.

Our builder's financial rep advised us to spend 6 months wiping out debt, and it made a big difference for us. But your situation might be different. Talk about mortgage insurance, income protection and different loan options. This will give you are realistic picture, based on your expenses.